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New Supply and Price Dynamics in the Singapore Housing Market

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  • Joseph T. L. Ooi
  • Thao T. T. Le

Abstract

In this paper, VAR models are employed to trace the price response of existing houses to the quantity of new units launched by homebuilders in Singapore between 1996 and 2009. Contrary to the ‘competition’ hypothesis prediction of a negative reaction, it is found that marginal supply Granger-cause existing house prices in a positive manner. The effect is robust to the inclusion of exogenous demand factors as well as price interaction in the primary (new houses) and secondary (existing houses) market segments. The ‘contagion’ effect is consistent with the hypothesis that developers, due to their ability to predict the market, are price leaders in the housing market. It is also found that homebuilders exhibit ‘herding’ behaviour in mimicking each other’s timing on when to market their new residential projects.

Suggested Citation

  • Joseph T. L. Ooi & Thao T. T. Le, 2012. "New Supply and Price Dynamics in the Singapore Housing Market," Urban Studies, Urban Studies Journal Limited, vol. 49(7), pages 1435-1451, May.
    • Handle: RePEc:sae:urbstu:v:49:y:2012:i:7:p:1435-1451
    DOI: 10.1177/0042098011415718
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    2. Sanghyun Kim & Juhyung Kim & Jaejun Kim, 2016. "Structural Changes in the Korean Housing Market before and after Macroeconomic Fluctuations," Sustainability, MDPI, vol. 8(5), pages 1-20, April.
    3. Ooi, Joseph T.L. & Le, Thao T.T. & Lee, Nai-Jia, 2014. "The impact of construction quality on house prices," Journal of Housing Economics, Elsevier, vol. 26(C), pages 126-138.
    4. Faith Wambui Kanjumba, 2017. "Economic and Innovative Factors Influence on Funding of the Supply-Side of Housing in Nairobi, Kenya," Business and Management Studies, Redfame publishing, vol. 3(4), pages 39-53, December.
    5. Ooi, Joseph T.L. & Le, Thao T.T., 2013. "The spillover effects of infill developments on local housing prices," Regional Science and Urban Economics, Elsevier, vol. 43(6), pages 850-861.

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